Medicare physician pay schedule faces a possible cut in 2002
Some experts predicting possible negative payment update’ next year
Medicare payments for physician services could dramatically decline next year, predicts the Medicare Payment Advisory Commission (MedPAC).
Preliminary estimates released in March by Medicare put the 2002 physician payment update at -0.1%, which means 2002 fees will be lower than those in this year’s fee schedule. However, in late June, MedPAC calculated that the actual 2002 payment update, which will be released next fall, could result in an even greater drop.
"The update for 2002 may ultimately be lower — perhaps significantly lower than [the original] estimate of -0.1 percent," MedPAC concluded.
The physician payment update is based on an inflation measure combined with the difference between the target spending level, called the sustainable growth rate (SGR), and actual spending on physician services in the previous year.
Due to expectations of slower enrollment growth in traditional Medicare, the 2002 estimated SGR is placed at 6%, compared to 7% estimated for 2001. The way the system works, if actual spending on physician services exceeds the SGR, the government lowers the following year’s physician payment update.
According to MedPAC, updates over the past two years — 5.4% in 2000 and 4.5% in 2001 — "were somewhat generous . . . in that they were higher than the estimated change in input prices" in physician services. However, the estimate for next year’s payment update is lower than the estimated change in input prices.
There is some good news: This drop in the update reinforces complaints that the current SGR formula needs to be revised to better reflect the cost of providing medical services. Indeed, the word is that various medical lobbies are hoping for a negative update to help make their point when pressing for reimbursement reforms during the fall.
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